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Blog: Stay tuned for another major solar casualty

It seems only a matter of time before the world witnesses yet another major casualty in the solar energy sector after the recent demise of U.S.-based SunEdison Inc.

The latest case is a bit different in a couple of respects: It is a Chinese firm this time around and it is a solar panel manufacturer instead of a solar developer. Yes, I’m talking about Yingli Green Energy Holding Co., aka Yingli Solar, once hailed as the biggest photovoltaic manufacturer in the world. On its website, the company still boasts of dubbing itself as one of the world’s leading solar manufacturer, having more than 30 regional subsidiaries and branch offices and having distributed more than 14 GW of solar panels to customers worldwide.

Hit hard by the continued decline in solar panels prices and a pile-up in debt, Yingli Solar is on the brink of filing for bankruptcy protection. The company’s latest filing with the U.S. SEC provides ample insight about the situation as it says “there is substantial doubt as to its ability to continue as a going concern.”

The Baoding, China-headquartered company made the assessment while notifying the SEC of its inability to file its annual report for 2015 on or before the prescribed due date of May 2. The company further said it needs more time to prepare and review its consolidated financial statements and to finalize the assessment of its internal control over financial reporting and other disclosures, including those related to the company’s liquidity.

Yingli Solar, according to Bloomberg News, has not recorded a quarterly profit since 2011 and has been in violation of loan covenants for at least a year. The sole reason for its survival so far is debt provided by Chinese state-backed lenders led by China Development Bank Corp. As recently as April 6, the company said it would be very difficult for subsidiary Baoding Tianwei Yingli New Energy Co. Ltd. to repay 1.4 billion yuan of medium-term debt due May 12. While the company sought an extension for payment of the debt, no agreement was reached with debt holders at the meeting.

In its request for 15-day extension to file its annual report, Yingli Solar said it expects a net loss in the range of 5.8 billion yuan to 5.9 billion yuan in 2015, up from a net loss of 1.3 billion yuan in 2014. The expected increase in 2015 net loss was primarily because of a decline in revenues driven by a decrease in PV module shipments, impairment of long-lived assets due to lower-than-expected utilization of certain production facilities and an increase in income tax expenses, among other things.

While Baoding Tianwei Yingli is still in the process of actively discussing with its debt holders about potential extension of the repayment dates of the notes issued in 2010 and 2011 and the company’s alternative financing plans for repayment, the chances of a rescue for the company by either a Wall Street investor or a strategic buyer are scant due to the ongoing turmoil in the solar manufacturing market in terms of panel prices.

As a matter of fact, the company’s alternative financing plans for debt repayment include introduction of strategic investors to invest into the company and the company’s subsidiaries, introduction of new creditors to grant new borrowings to the company or the company’s subsidiaries and sales of certain long-lived assets, including land-use rights to obtain additional funds.

So, stay tuned for more from the company regarding its alternative financing plans to improve its liquidity and financial position in its annual report filing.